SIPs Beat Turmoil In Debt MF Market, Clinch 38% Growth In FY19

It seems Systematic Investment Plans, or SIPs as they are widely known among investors, have defeated the current negative sentiments in the debt mutual funds. According to Association of Mutual Funds India (AMFI), in just one month completing in March 2019, SIPs contributed Rs 8,055 crore to the entire mutual funds industry. Though, the March 2019 figure was marginally down by 0.49% as against Rs 8,095 crore in February 2019, the overall growth in SIP investments surged 38% year-on-year in FY2019 to Rs 92,693 crore.

Besides, SIP mutual funds accounts stand at Rs 2.62 crore, which is a significant addition. The overall Average Assets Under Management (AAUM) came in at Rs 24.58 lakh crore in March 2019, up 1.36% month-on-month, AMFI data revealed.

According to AMFI, in April fixed maturity plans (FMPs) saw a net outflow of Rs 17,644 crore from the mutual funds market. The category saw fresh purchase of Rs 384 crore in the month under consideration. Besides, SIPs showed good numbers at a time when credit risk funds saw net outflows of Rs 1,253 crore in the same month. The new purchases in the credit risk category stood at Rs 995 crore.

SIPs are the most convenient and easy way of investing money in mutual funds, this is what the financial advisors believe and base their argument on in favour of the “disciplined” mode of investment. Financial planners say this could also be the reason why number of SIP investors and their contributions in the mutual funds industry has gone up over the past few years.

According to a release by rating agency ICRA, Moody’s India arm, out of the total AAUM proportionate share of equity-oriented schemes came in at 42.05% of the industry assets in the last month of the financial year as against 41.07% in February 2019.

“Meanwhile, the same came in at 52.32% in March as against 54.12% in the previous month for liquid and debt oriented schemes. Exchange Traded Funds (ETF) and Fund of funds (FoF) share stood at 5.18% in the month under review,” the release said citing AMFI data.

Hit among investors

Suresh Sadagopan, CFP and Founder, Ladder7 Financial Advisories, while giving the reason in support of this surge said that over the past four to five years, SIP mutual funds have outperformed many other investment avenues or asset classes like real estate, gold or fixed deposits. “One of the reasons is of course the rupee cost averaging factor which is the basic character of SIPs,” he added. SIPs also mean investors don’t need to panic when at the time of market crash instead they should stay invested.

SIPs automatically factor in market fluctuations in their portfolio. While explaining rupee cost averaging, Sadagopan cited an example where if you are investing Rs 100 in ten SIP mutual fund units with each of Rs 10 Net Asset Value (NAV), you will get ten units. And if the NAV falls due to turmoil in markets to Rs 9.5 or Rs 8.5, you will get more number of units in your portfolio on your Rs 100 investment, he explained.

Start small

According to AMFI, the SIP installment amount could be as small as Rs 500 per month. SIP is similar to a recurring deposit where you deposit a small or fixed amount every month. “SIP is an investment plan (methodology) offered by mutual funds wherein one could invest a fixed amount in a mutual fund scheme periodically at fixed intervals – say once a month instead of making a lump-sum investment,” AMFI said.

Also, under SIP, you can lodge standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time. This will save you a lot of time as well apart from removing hassles. AMFI data shows the mutual funds industry had added about 9.13 lakh SIP accounts each month on an average during the financial year 2018-19, with an average SIP size of about Rs 3,070 per SIP account.